UMW v. BOYLE

At an earlier stage in these proceedings the Court found that the defendants herein, W. A. ("Tony") Boyle, George Titler, and John Owens, as officers of the plaintiff United Mine Workers of America (UMWA), had violated fiduciary duties imposed upon them by Section 501 of the Labor-Management Reporting and Disclosure Act (LMRDA), 29 U.S.C. § 501. Pursuant to those findings, on December 9, 1975 a final judgment was entered in favor of UMWA against the defendants jointly and severally in the aggregate amount of $239,993.25 and against defendant Boyle individually in the additional amount of $69,870.50.
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A motion by the defendants to alter or amend the judgment was denied on January 9, 1976. On February 6, 1976, defendant Owens noticed an appeal from the judgment of December 9, 1975. That appeal is presently pending.
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Each of the three defendants is a beneficiary of the International Union, UMWA Pension Trust (the "Pension Trust") which is administered by The National Bank of Washington as Trustee (the "Trustee"). For the purpose of securing satisfaction of the Court's judgments, on April 6, 1976 the UMWA levied writs of attachment against the beneficial interests of the defendants in the Pension Trust, addressed to the Trustee.
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Since the principal contentions advanced in support of and in opposition to the various pending motions involve the interpretation and ultimate effect of Paragraph 12 of the Pension Trust Indenture, as amended, (the "Indenture"), the Court must determine at the outset whether or not that provision creates a valid spendthrift trust. Paragraph 12 states, in pertinent part,

No employee or retired employee shall have any right, title, or interest to any portion of the Pension Fund held by the Trustee, until actual payment to the retired employee by the Trustee. No assignment, anticipation, pledge or encumbrance whatsoever shall be permitted and no attempts on the part of the retired employee to transfer or pledge his right to any payment or portion of the monthly pension herein provided shall be recognized by the Trustee. All pension payments shall be made directly into the hands of the retired employee and to no other person, nor shall any such monthly payments be subject to attachment or other legal process (Plaintiff's Exh. 1).

Whether a valid spendthrift trust has been created in a particular instance is an issue controlled by the intent of the settlor (or trustor) as manifested in the language actually employed -- "no special form of words is necessary." Morrow v. Apple, supra, 58 App. D.C. at 172, 26 F.2d at 544. Thus, a trust which by its terms imposes "a valid restraint on the voluntary and involuntary transfer of the interest of the beneficiary" is a spendthrift trust. Restatement (Second) of Trusts § 156 (2) (1959) [hereinafter "Restatement"].

Applying the foregoing legal principles to the terms of paragraph 12 of the Trust Indenture, we conclude that the settlor did in fact create a valid and enforceable spendthrift trust. From the unequivocal language used the desire to impose an absolute restraint upon the voluntary and involuntary alienation of the beneficiary's equitable interest is evident. A retired employee-beneficiary has no right, title or interest in any portion of a monthly pension payment until an actual disbursement to him has occurred. The Trustee is expressly directed to make all payments to the beneficiary and any attempt by a retired employee to transfer or pledge any monthly payment, or portion thereof, is declared of no effect. Moreover, it is explicitly stated that pension trust payments shall not be "subject to attachment or other legal process."

However, where a spendthrift trust has been created, it does not inexorably follow that its terms constitute an absolute bar to the lawful claims of all classes of creditors. For, as the Court of Appeals in American Security and Trust Co. v. Utley, supra, noted:

We have long recognized the validity of the so-called spendthrift trust, but not without limitation. The historical purpose of the settlor or testator in creating a trust, the income of which was protected from invasion, was to protect the interests of the beneficiary. This purpose has been held to render the income totally immune from claims . . . We see no reason for an absolutist "all or nothing" approach. See, e.g., Shelley v. Shelley, 223 Or. 328, 334, 354 P.2d 282, 285 (1960). Traditionally, in the absence of a statute, several distinct classes of claimants have been permitted to invade the beneficiary's interest. See Restatement, supra, at § 157. (Footnotes omitted). 127 U.S. App. D.C. at 236-37, 382 F.2d at 452-53.

The UMWA asserts an exception. It contends that even if paragraph 12, supra, of the Trust Indenture imposes an otherwise valid restraint upon voluntary and involuntary alienation of the defendants' beneficial interests, considerations of public policy militate against application of its prohibitory effect in the circumstances at hand, viz. : (1) "self dealing" by these defendants in the creation and subsequent amendment of the Pension Trust, and (2) the tortious ...

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